Carnival of Wealth, April 1 Edition

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Put the whoopee cushion away while you’re at it. April Fool’s Day, like St. Patrick’s and New Year’s, is largely for amateurs. Instead, enjoy the wonder that is the weekly Carnival of Wealth, personal finance blog posts from around the world:

You don’t know what a brokerage account is, yet you want to enter the exciting world of market speculation? What the hell is wrong with you? Glen Craig at Free From Broke encourages you to step back, proceed slowly and understand the differences among accounts before jumping in.

Kristen at My Dollar Plan listed a bunch of hotel chains’ reward programs. She also used the expression “like a broken record.” Can’t we replace that with something more contemporary? Vinyl records aren’t just obsolete, the format that replaced them (and the one that replaced that) is too.

Every hotel and hotel reward program is different so be sure you know how each program works and what you have to do to earn points and use points.

A lie. The Baymont Inn in De Funiak Springs, Florida and the La Quinta in Snohomish, Washington are identical.

Did you know that Social Security benefits weren’t taxable before 1983? Fortunately, the people who were 65 then are 95 now and for the most part no longer part of our calculations. Michael at Kitces.com explains how in 2013, if you have enough investment income, your marginal tax rate with Social Security benefits can jump all the way to 46%. So allocate your assets better, and you’re probably going to want to do a Roth conversion somewhere along the way. Also, vote Libertarian.

Katrina Lamb is a CFA. She also blogs at Jemstep, and introduces the concept of a “liquidity event” to personal finance. Long story short, a liquidity event is when a company gets sold or goes public. The term is used only by lonely people who prefer jargon to actual human relationships. To Katrina, “liquidity event” has almost the opposite meaning at the micro level. It can mean going to college, buying a second home…basically anything that requires you to spend lots of money rather than receive it. She thinks you should save, gravitate from stocks to bonds as you get closer to a savings goal, and either keep your money in 2 accounts or more than 2. Great. Also, never say “is going to cost a lot of money” when you can say “will require a significant outlay of funds.” Makes you sound so much smarter.

With the market at all-time (current dollar) highs, Dividend Growth Investor reminds us that there are still some stocks that aren’t trading at levels anywhere near as high as they should be.

From Pauline Paquin at Reach Financial Independence, confirmation of a theory we have yet to codify (it’s still just a theory.) Your behavior predicts your perspective, and thus your success. We read far too many personal finance bloggers whose disdain for productivity and common sense comes through in their writing. They end up in debt, focusing their indignation on a system they’re convinced is stacked against them.

Then you’ve got Pauline, who’s living the dream of an independent beachfront existence in a warm climate, complete with passive income and a staff. And this in her early 30s. Was she lucky? Yes, if you count working from an early age and taking a beneficial course of study in college as luck.

Pauline’s American equivalent, the stupendous Paula Pant (2012 Control Your Cash Woman of the Year!) returns with more of her pithiness and profundity at Afford Anything. Stop what you’re doing and just plow through her archives in one sitting. She’s easy to read, not because she’s simplistic but because she knows how to write. This week, she explains how money can buy you something infinitely more valuable than stuff.

A related point by CoW newcomer Mike Collins at Wealthy Turtle: income is not wealth. There’s a reason why politicians who want to increase income taxes don’t usually concern themselves with how higher taxes will impact their own incomes. (Because they have lots of untouchable wealth.)

Did we already use “brilliant” to describe Paula Pant? [checks] The brilliant PKamp3 at DQYDJ.net looks at price elasticity in his new post. Well, he doesn’t refer to it as such, but he examines and graphs how much people spend on groceries vs. outside food as income (and perhaps, wealth) rises. We’d love to see the results localized to New York City, where no one has an SUV to load up at the Walmart Supercenter and some people store clothes in their ovens. Also, graph does not include data from the Irish Potato Famine, which would skew everything.

Free Money Finance refers to his college education as a $5,000 investment that made him millions, but that was in a different century. These days tuition has skyrocketed in constant dollars while the return from an education has dwindled, the latter happening because a whole lot of degrees are a whole lot of useless. Also, it took us years but we finally noticed that Free Money Finance’s logo borrows liberally from the Dallas Stars.

Parents, let us paraphrase what FMF has to say about college: Stop indulging your little snowflakes. People aren’t supposed to go to college for the social fulfillment, for the exposure to people of other backgrounds, or any of that claptrap. You can get social fulfillment and meet unfamiliar people anywhere, and not even have to pay tens of thousands for the privilege. You go to college solely to increase your earning capacity. If the toddler whom you started a 529 plan for turns out years later to have little patience for the classroom but shows lots of aptitude with his hands, then congratulations, you wasted your efforts and your cash.

Eech. That’s so philistine and mercenary of you. 

Fine, you win. College is whatever you want it to be. It still costs money, unless you’re remarkable enough to have earned acceptance to a military academy.

Speaking of which, Jason (USMA) at Hull Financial Planning reminds us that having more money is better than having less. To us and hopefully you, that’s so obvious it hardly counts as knowledge. But to many, including at least one contributor whom we’ll feature later in the CoW, it’s anything but.

Money can’t buy you happiness. But it can buy you a big yacht.
-David Lee Roth

Everyone, without exception, stands to benefit from greater material wealth. Granted, someone like Amanda Bynes would just put the incremental dollars up her nose, but that’s neither here nor there. Feeling trepidation or reluctance about money is retarded, and for several reasons. First, it makes it easier for the people who don’t feel any trepidation; less competition for them.  Second, you’ve got to get out of this mindset that sees money as something tangible – represented by a wad of greenbacks or a handful of shiny gold coins, doubloons doubtless pilfered at the hands of the proletariat. Money is a vehicle. More to the point, it’s a working representation of value. Think of the collective total of wealth in the world – all the server farms, literal farms, CT scan machines, minivans, electric guitars and open-air entertainment venues in existence, along with the trillions of other goods (and services) that make life today preferable to life at any other time in human history. It’s tough to quantify them, or each of our individual contributions to the whole, so we use money to keep score. Being uncomfortable with or intimidated by money is like feeling apprehensive about abacus beads or tally marks. Grow up. More to the point, grow up and earn more.

Lynn B. Johnson at Wallet Blog tells us that the people at Sesame Street created a financial literacy thing for preschoolers. It features Elmo! (Bonus: Gratuitous attack on the Koch brothers, and if someone can explain why they’re evil without repeating talking points from the latest issue of Mother Jones, we’re listening.)

Look, the problem is stark: most teenagers and young adults (and middle-aged adults and old adults) know nothing about money. That’s why they make the minimum payments on their credit cards and their idea of increasing revenue is begging the boss for a raise every couple of years. Worse yet, they’ll get wind of the crooks and thieves who personify pop personal finance – the Ramseys, Ormen, and Trent Hamms – and start employing self-defeating measures such as debt snowballs and emergency funds.

But Elmo’s target audience doesn’t care about money. Elmo’s target audience cares about candy and bubble wrap. Still, Lynn’s premise is sufficiently socialistic, equality of outcome being the political objective of choice for most 4-year-olds:

In an era when the 400 richest Americans account for the same amount of collective wealth as 62% of the nation’s entire population combined and the United States is the fourth most wealth-unequal country in the world, something is grievously wrong with the way income is earned, saved, and distributed.

4th-most wealth-unequal country in the world? The inelegant phrasing notwithstanding, how are we measuring that? Also, is she serious? Every African nation at the bottom of the per capita GDP list consists of a bunch of subsistence farmers ruled by a plutocrat. In the United States, rich people populate every sphere from manufacturing to textiles to software. The barriers to entry are easy to hop over.

Furthermore, is equality of wealth something we should want? It implies that every person should have the same tolerance for risk, the same diligence, the same market for their disparate skills, and the same age (or do people not build more wealth as they grow older?)

When adult women are sponging off their grandparents and buying iPads, and FICA taxes are regressive, we need less equality of wealth, not more. We here at Control Your Cash are the first ones to say that there’s a dearth of sensible financial education, but there is such a thing as starting too young. Parents, educate thyselves first. Then teach your kids. You can start here.

Jamie’s Money Advice includes knowing how to calculate return on investment and several related metrics. CYC’s Blog Advice includes using a bigger font on your site. The man has 35 Twitter followers and 0 comments on that post. Help him out.

William, who’s either one of the leeches at Quote Me A Price or just a hired hand they pay to write blog posts, wants to buy your annuity payments. They keep submitting and availing the world of their noxious service, so it’s all we can do to help publicize it (and tell you that you’re an idiot if you patronize them.)

You haven’t funded your traditional IRA for 2012 yet? Tax day is a fortnight away, so put down the CoW and do it now. So says Michael at Financial Ramblings, who reminds you that the IRS doesn’t give 2nd chances. However, it will let you fund a Roth IRA whenever and wherever. That being said, the latter contributions aren’t tax deductible. Isn’t governmental complexity awesome?

YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES. YES.

HELL YES.

Sorry, we were just reading the latest from Darwin’s Money. We’ll let the headline speak for itself: “Here’s Everything I’ve Done with my Money by NOT Having an Emergency Fund.”

Charles Davis at Wallet Hub gives a primer on the different types of mortgages available. We’ll simplify: there exist 1) fixed-rate and B) garbage. Alright, that’s not fair. Charles also includes home equity loans and VA loans in his analysis, but our brief analysis of his more detailed analysis concentrates on the mathematical makeup of mortgages – principal, interest, variability of same, etc.

Andrew at 101 Centavos is his old inimitable self. With artificially cheap money courtesy of the corrupt and criminal Federal Reserve, interest rates remain miniscule. Which means mortgages are inexpensive. Which means you should only mess with a short-term one if you have nowhere to invest the money you’d otherwise have on hand if you had a 30-year mortgage. So get a 30-year one and free up your capital for better uses. Also, eat your lutefisk.

Harry Campbell at Your PF Pro says you should bring your own food and drinks to the airport, and not pay for Wi-Fi.

And we’re done. Check us out on Investopedia (here’s a vintage piece of ours), and join us back here tomorrow for more foolishness.

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